Dr Maximilian Guth

AIDA XIV World Congress 2014
Rom, 30th September 2014
Marine Insurance WP
“Sue and labour expenses – H&M on German terms or P&I?”
Dr. Maximilian Guth, LL.M.
Rechtsanwalt & Solicitor of England & Wales
Introduction
 Sue and labour expenses: Which expenses are
covered under an H&M Policy on German terms and
which expenses are covered under the P&I Insurance
 Special focus: - Salvage Expenses
- Randsom Payments
Agenda
1. German H&M Sue & Labour Clause
2. P&I Sue & Labour Rule
3. Potential overlaps between H&M on German Terms
and P&I in Sue and Labour cases
4. Salvage Costs
5. Ransom Payments
6. Conclusion
1. German H&M Sue & Labour Clause
Clause 31.1.1 DTV-ADS 2009 and § 32 ADS 1919
Insured expenses and costs
The Insurer also indemnifies:
expenses incurred by the Insured after the occurrence
of an insured event for the prevention or mitigation of
an indemnifiable loss, to the extent that, under the
circumstances, the Insured was justified in regarding
them as necessary;
1. German H&M Sue & Labour Clause
Clause 31.1.1 DTV-ADS 2009 and § 32 ADS 1919
“for the prevention or mitigation”:
Measures need to be done to prevent or mitigate
insured losses but this does not have to be the only
reason.
Reichsgericht: Salvage by reason of an order by
public authorities for the safety of
maritime traffic can also qualify as sue
and labour expenses
1. German H&M Sue & Labour Clause
Clause 31.1.1 DTV-ADS 2009 and § 32 ADS 1919
“the Insured was justified in regarding them as
necessary”:
• Decisive is the view of the insured who must have
acted without fault in regarding the measure
necessary
• Sueing and labouring by the master is always
necessary => misjudgements of the assured himself
necessary
1. German H&M Sue & Labour Clause
Clause 31.1.1 DTV-ADS 2009 and § 32 ADS 1919
“the Insured was justified in regarding them as
necessary”:
• Everything done due to the instructions of the
insurer or an agent named in the policy is necessary
• Everything the insured is bound to do because of
the sueing and labouring “Obliegenheit” (warranty;
cf. clause 44 DTV-ADS 2009 and § 41 (1) 1 ADS
1919) is necessary
1. German H&M Sue & Labour Rules
Clause 31.2 DTV-ADS 2009 and § 32 (2) ADS 1919
Insured expenses and costs
The Insurer must bear the expenses and costs
described in Clauses 31.1.1 and 31.1.2 DTV-ADS 2009
(described in § 32 ADS) even if the measures
undertaken were unsuccessful; upon the request of
the Insured, the Insurer must advance the sum needed
to cover these expenses.
1. German H&M Sue & Labour Clause
Clause 41.2 DTV-ADS 2009 and § 37 (2) ADS 1919
Limits of liability
…expenses and costs the insurer must bear in
accordance with Clause 31 DTV-ADS 2009 (§ 32 ADS)
are reimbursed even if, together with other
payments, they exceed the sum insured.
2. P&I Sue & Labour Rule
Extraordinary costs and expenses reasonably incurred
on or after the occurrence of any casualty, event or
matter liable to give rise to a claim upon the
Association and incurred solely for the purpose of
avoiding or minimizing any liability or expenditure
against which the Owner is wholly or, by reason of a
deductible, partly insured by the Association, but only
to the extent that those costs and expenses have
been incurred with the agreement of the Managers or
to the extent that the Directors in their discretion
decide that the Owner should recover from the
Association.
3. Potential overlaps between H&M on German Terms
and P&I in Sue and Labour cases
 Costs incurred as a part of sue and labour for the
purpose of preventing or minimasing the damage to
the vessel are always primarily covered by H&M
 P&I covers sue and labour measures when such
measures were solely aimed to avoid or minimise any
liability or expenditure in respect of risks insured by
the P&I
3. Potential overlaps between H&M on German Terms
and P&I in Sue and Labour cases
 Potential overlaps in cases where expenses are
incurred in joint interest of H&M and P&I, e.g. Salvage
services and ransom payments.
P&I
* Oil pollution liabilities
H&M
* Wreck removal
liabilities
Saving the vessel
* Crew liabilities
* Cargo liabilities
4. Salvage Costs
 Salvage Costs = Sue & Labour Costs in the meaning of
§ 32 ADS 1919?
Reichsgericht:
No – Only in GA cases
and GA rules are exclusive
Court of Appeal of the
City of Hamburg and
practitioners:
Yes
4. Salvage Costs
 31.3 DTV-ADS 2009: If the expenses involve salvage
remuneration in which the skill and efforts of the
salvors in preventing or minimising damage to the
environment, as referred to in Art. 13 Clause 1 b) of
the 1989 International Convention on Salvage,…., the
overall insurance cover will be limited by the sum
agreed in the insurance contract.
 DTV-ADS 2009 => Salvage Costs = Sue and Labour
4. Salvage Costs
 31.3 DTV-ADS 2009:
BUT
The Insurer will not indemnify the Insured in respect of
special compensation payable to a salvor under Art. 14
of the 1989 International Convention on Salvage, or of
costs or expenses based on any SCOPIC clause or any
other provision in any statute, rule, law or contract which
is similar in substance.
4. Salvage Costs
 As Sue and Labour costs are reimbursed even if they
exceed the sum insured the ships proportion for
general average exceeding the agreed value under
the H&M Insurance on German Terms does not to be
covered under P&I if salvage costs are qualified as sue
and labour expenses under H&M what is now
expressly stated in the DTV-ADS 2009
 P&I cover must be in place for the sum exceeding the
sum agreed for preventing or minimising damage to
the environment and the special compensation
4. Salvage Costs
 Above that division of the salvage costs generally
covered by H&M Insurers as these are equally for the
benefit of P&I?
4. Salvage Costs
Seabord Shipping v Jocharanne Tugboat etc.
Salvage expenses were incurred after an oil-laden
barge stranded and began to leak oil into harbour
waters
4. Salvage Costs
Seabord Shipping v Jocharanne Tugboat etc:
First Instance:
Expenses should be borne equally by
the owner´s hull and P&I underwriters
because the owner had sued
and laboured on behalf of H&M and
P&I
4. Salvage Costs
Seabord Shipping v Jocharanne Tugboat etc
US Court of Appeals:
No contribution due to the P&Isubsidiary rule and the
services rendered were primary
directed to the benefit of the
Hull insurerer and any benefit
to P&I was in a sense incidential
4. Salvage Costs
P&I Subsidiary Rule:
Unless and to the extent that the Directors in their
discretion otherwise decide, or the Managers agree in
writing as a term of entry, the Association shall not
indemnify the Owner of an entered ship against any
liabilities, costs or expenses against which that Owner
would have been insured if at the time of the incident
giving rise to those liabilities, costs or expenses the
ship had been fully insured for its proper value under
Hull Policies on terms equivalent to those of the
Lloyd’s Marine Policy MAR form 1/1/82 with the
Institute Time Clauses Hulls 1/10/83 attached.
4. Salvage Costs
Exclusion of sums insurable under hull policies
“…against which that Owner would have been
insured…the ship had been fully insured… under Hull
Policies”
 Subsidiary Rule applies irrespective of the vessel being
in fact insured und a Hull Policy
(German law: Main view is that such subsidiary rule
would be invalid as it is unreasonable from an
assureds point of view)
4. Salvage Costs
Seabord Shipping v Jocharanne Tugboat etc
 Even if no subsidiary Rule is agreed no division of
expenses as benefit for P&I is incidental?
(+) if no cover under P&I as Sue and Labour
Expenses because than the double insurance Rules
do not apply => „…incurred solely for the purpose
of avoiding or minimizing any liability or
expenditure …” (P&I Sue and Labour Clause)
5. Ransom Payments
 DTV-ADS 2009: Piracy excluded risk in H&M (Cl.
35.1.4) and included in War cover (Cl. 84.1.6)
 ADS 1919/ DTV-Clauses: In H&M cover included („all
risk“ and expressly stated as being insured in § 73 ADS
and Clause 15 DTV-KK)
 General average or Sue and Labour?
5. Ransom Payments
General average or Sue and Labour?
One opinion:
General average and that excludes the
qualification as Sue and Labour
expenses.
(P) Only Owners´ contribution
covered, no advance payment and
restricted to sum insured
5. Ransom Payments
General average or Sue and Labour?
Other opinion:
General average and sue and labour
=> one does not exclude the other
5. Ransom Payments
 Division of ransom payment between H&M Insurer on
German terms and P&I when ransom payment is far
above the vessels value and therefore mainly paid to
salve the crew?
 „solely“
6. Conclusion
P&I generally does not participate in Sue an Labour
expenses covered by H&M but in exraordinary cases
might apply the Omnibus Rule:
Contribution from P&I to Sue and Labour Expenses
covered by H&M but which are also for the benefit
of P&I will only be paid if the Directors in their
discretion decide otherwise.
Thank you for your attention!